The Maine Department of Transportation has purchased the former Denny’s Restaurant at 1091 Congress St. in Portland to make way for a roundabout near Exit 5 of Interstate 295.

The department has hired a company to tear down the building at Congress Street and Park Avenue within a month, spokesman Paul Merrill said.

The project is part of a plan to reconnect the Libbytown neighborhood that was divided and displaced in the 1960s by the construction of Interstate 295 and its cloverleaf interchanges.

The Department of Transportation and the city of Portland have applied for a $22.4 million grant from the Reconnecting Communities and Neighborhoods Program of the U.S. Department of Transportation.

“We hope to get the grant, but the project isn’t contingent on getting that funding,” Merrill said.

The grant application says the project’s total cost is $28 million, with the department and the city each kicking in $2.8 million.

However, the department’s latest work plan allocates $2.5 million in 2024 for a project at Congress Street and Park Avenue that includes land acquisition. It also allocates $31.5 million in 2026 for a project at the same location that includes road and ramp reconstruction.

Merrill said he was unable to clarify the project’s costs late Wednesday.

A favorite all-night dining spot for many years, Denny’s closed permanently in 2022. Demolition must be completed by Feb. 24, according to contractor bid specifications.

Libbytown is one of the city’s oldest neighborhoods, named for tavern keeper George Libby and his descendants who settled in the area in the early 1800s, according to the grant application.

Known as Libby’s Corner, the intersection of Congress Street and Park Avenue was the center of a small but thriving district of more than 15 businesses and 200 families that was severed by the highway and its cloverleaf interchanges, the application states.

The project is expected to significantly improve the way residents and visitors get around the neighborhood and reach nearby schools, grocery stores, medical facilities, pharmacies, restaurants, museums, entertainment and recreation, according to the grant application.

The project calls for numerous transportation-related connectivity improvements in the neighborhood, including construction of a “modern roundabout” at Congress Street and Park Avenue that would slow motor vehicle traffic as it passes beneath I-295.

The project also would restore two-way traffic to Congress Street and Park Avenue, which are now one-way streets. Improved traffic lights, signs, crosswalks, transit stops, bike lanes and pedestrian features also are planned.

“The project creates better and more convenient affordable transportation connections to essential needs and economic opportunities,” the application states. “It will enhance and encourage transportation options that do not require an automobile.”

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